ATS Reports First Quarter Fiscal 2024 Results

CAMBRIDGE, ON, Aug. 9, 2023 /PRNewswire/ - ATS Corporation (TSX: ATS) (NYSE: ATS) ("ATS" or the "Company") today reported its financial results for the three months ended July 2, 2023. All references to "$" or "dollars" in this press release are to Canadian dollars unless otherwise indicated.

First quarter highlights:

• Revenues increased 23.4% year over year to $753.6 million.
• Net Income was $47.7 million compared to $39.4 million a year ago.
• Basic earnings per share were 50 cents, compared to 43 cents a year ago.
• Adjusted basic earnings per share1 were 69 cents compared to 57 cents a year ago.
• Order Bookings1 were $690 million, 6.3% lower compared to $736 million a year ago.
• Order Backlog1 increased 30.1% to $2,023 million compared to $1,555 million a year ago.

"Today we reported a strong start to fiscal 2024, including record revenues, supported by solid Order Bookings, Order Backlog and adjusted earnings," said Andrew Hider, Chief Executive Officer. "This has been an exciting and transformational few months for ATS during which we successfully completed our U.S. initial public offering ("U.S. IPO") and New York Stock Exchange ("NYSE") listing. These milestone accomplishments support our strategic growth objectives while providing increased liquidity in our shares and additional flexibility for M&A."

In conjunction with the successful U.S. IPO, the Company sold 6,900,000 common shares for gross proceeds of U.S. $282.9 million. Proceeds were initially used to pay down amounts drawn on the Company's revolving senior secured credit facility, reducing its net debt to adjusted EBITDA ratio to 2.0 to 1 at July 2, 2023 (from 2.7 to 1 at March 31, 2023). The Company expects the increase in available capital from the U.S. IPO will be used for strategic opportunities, including acquisitions, as well as working capital requirements and general corporate purposes. Consistent with the Company's value creation strategy, the Company may execute on strategic opportunities, including disciplined acquisitions, if and when such opportunities arise, that drive the creation of long-term sustainable shareholder value.

Mr. Hider added: "Our strong Order Backlog, which is distributed across strategic global markets and regulated industries, give us confidence moving forward. We remain committed to a disciplined focus on our strategy and the pursuit of operational excellence through the ATS Business Model ("ABM") as we continue to build the best ATS for our employees, customers, and shareholders."

1 Non-IFRS measure: see "Notice to Reader: Non-IFRS and Other Financial Measures".

 

Financial results (In millions of dollars, except per share and margin data)	Three Months Ended	Three Months Ended
	July 2, 2023	July 3, 2022	Variance
Revenues	$         753.6	$         610.6	23.4 %
Net income	$           47.7	$           39.4	21.1 %
Adjusted earnings from operations1, 2	$         102.1	$           79.2	28.9 %
Adjusted earnings from operations margin1, 2	13.5 %	13.0 %	58bps
Adjusted EBITDA1, 2	$         119.2	$          92.5	28.9 %
Adjusted EBITDA margin1, 2	15.8 %	15.1 %	67bps
Basic earnings per share	$           0.50	$          0.43	16.3 %
Adjusted basic earnings per share1, 2	$           0.69	$          0.57	21.1 %
Order Bookings1	$         690.0	$        736.0	(6.3) %
As At	July 2 2023	July 3 2022	Variance
Order Backlog1	$       2,023	$        1,555	30.1 %

1

Non-IFRS Financial Measure - See "Non-IFRS and Other Financial Measures."

2

Certain Non-IFRS Financial Measures have been revised from previously disclosed values to exclude the impact on stock-based compensation expense of the revaluation of deferred stock units and restricted share units resulting specifically from the change in market price of the Company's common shares between periods. Management believes that this adjustment provides further insight into the Company's performance, as share price volatility drives variability in the Company's stock-based compensation expense.

First quarter summary
Fiscal 2024 first quarter revenues were 23.4% or $143.0 million higher than in the corresponding period a year ago. This performance reflected year over year organic revenue growth (growth excluding contributions from acquired companies and foreign exchange translation) of $94.1 million or 15.4%, and revenues earned by acquired companies of $15.3 million, most notably $8.3 million from Zi-Argus Australia Pty Ltd. and Zi-Argus Ltd. (together, "ZIA"), which was acquired in the fourth quarter of fiscal 2023. Foreign exchange translation positively impacted revenues by $33.6 million or 5.5%, primarily reflecting the strengthening of the U.S. dollar and Euro relative to the Canadian dollar. Revenues generated from construction contracts increased 35.6% or $133.7 million due to organic revenue growth combined with positive foreign exchange translation impact. Revenues from services increased 24.7% or $28.2 million due to revenues earned by acquired companies of $16.2 million and the positive impact of foreign exchange translation . Revenues from the sale of goods decreased 15.6% or $18.9 million primarily due to lower Order Backlog entering the year compared to the prior year.

By market, revenues generated in life sciences decreased $12.0 million or 4.0% year over year. This was primarily due to higher revenues earned on a large $120.0 million program in progress a year ago, partially offset by contributions from acquisitions and the positive impact of foreign exchange translation. Revenues in transportation increased $121.5 million or 125.3% on higher Order Backlog entering  the  first  quarter  of  fiscal  2024,  driven  primarily  by  electric  vehicle  ("EV")  Order Bookings, including previously announced EV Order Bookings of U.S. $578.2 million. Revenues generated in food & beverage increased $21.8 million or 20.0% due to higher Order Backlog entering the first quarter of fiscal 2024. Revenues generated in consumer products increased $7.9 million or 10.4% primarily due to $4.6 million of contributions from acquisition, most notably ZIA. Revenues in energy increased $3.8 million or 11.8% due to $3.5 million of contributions from acquisitions, most notably IPCOS Group N.V. ("IPCOS").

Net income for the first quarter of fiscal 2024 was $47.7 million (50 cents per share basic), compared to $39.4 million (43 cents per share basic) for the first quarter of fiscal 2023. The increase reflected higher revenues, partially offset by higher cost of revenues, selling, general and administrative expenses ("SG&A"), stock-based compensation, income tax expense, and financing costs. Adjusted basic earnings per share were 69 cents compared to 57 cents in the first quarter of fiscal 2023 (see "Reconciliation of Non-IFRS Measures to IFRS Measures").

Depreciation and amortization expense was $35.7 million in the first quarter of fiscal 2024, compared to $33.6 million a year ago.

EBITDA was $114.7 million (15.2% EBITDA margin) in the first quarter of fiscal 2024 compared to $95.2 million (15.6% EBITDA margin) in the first quarter of fiscal 2023. EBITDA for the first quarter of fiscal 2024 included $0.1 million of incremental costs related to acquisition activity and $4.4 million of stock- based compensation revaluation expenses. EBITDA for the corresponding period in the prior year included $0.4 million of incremental costs related to acquisition activity, $5.2 million of acquisition- related inventory fair value changes, and $(8.3) million of stock-based compensation revaluation expenses. Excluding these costs, adjusted EBITDA was $119.2 million (15.8% adjusted EBITDA margin), compared to $92.5 million (15.1% adjusted EBITDA margin) for the corresponding period in the prior year. Higher adjusted EBITDA reflected higher revenues, partially offset by increased SG&A expenses. EBITDA is a non-IFRS measure - see "Non-IFRS and Other Financial Measures."

Order Backlog Continuity (In millions of dollars)	Three Months Ended	Three Months Ended
	July 2, 2023	July 3, 2022
Opening Order Backlog	$               2,153	$                1,438
Revenues	(754)	(611)
Order Bookings	690	736
Order Backlog adjustments1	(66)	(8)
Total	$               2,023	$                1,555

1     Order Backlog adjustments include foreign exchange adjustments, scope changes and cancellations.

Order Bookings
First quarter fiscal 2024 Order Bookings were $690 million. The 6.3% year over year decrease reflected an organic Order Bookings decline of 12.8%, partially offset by 2.1% growth from acquired companies,  in addition to a 4.4% increase due to foreign exchange rate translation of Order Bookings from foreign- based ATS subsidiaries, primarily reflecting the strengthening of the U.S. dollar and Euro relative to the Canadian dollar. Order Bookings from acquired companies totalled $15.2 million, most notably $9.5 million from ZIA. By market, Order Bookings in life sciences increased compared to the prior-year

period primarily due to foreign exchange rate translation of Order Bookings from foreign-based ATS subsidiaries, in addition to $3.1 million of contributions from acquired companies. Order Bookings in transportation decreased compared to the prior-year period, which included a U.S. $70.0 million Order Booking from an existing global automotive customer to move towards fully automated battery assembly systems for their North American manufacturing operations. Order Bookings in food & beverage increased compared to the prior-year period primarily due to foreign exchange rate translation of Order Bookings from foreign-based ATS subsidiaries, in addition to $3.3 million of contributions from acquired companies. Order Bookings in consumer products increased principally due to contributions from acquired companies, primarily ZIA totalling $5.5 million. Order Bookings in energy increased due to timing of customer projects and contributions from acquisitions, primarily IPCOS totalling $3.2 million.

Trailing twelve month book-to-bill ratio at July 2, 2023 was 1.18:1. Book-to-bill ratio is a supplementary financial measure - see "Non-IFRS and Other Financial Measures."

Backlog
At July 2, 2023, Order Backlog was $2,023 million, 30.1% higher than at July 3, 2022. Order Backlog growth was primarily driven by higher Order Bookings in fiscal 2023 within the transportation market, primarily from EV projects.

Outlook
The life sciences funnel for fiscal 2024 remains strong, with a focus on strategic submarkets of pharmaceuticals, radiopharmaceuticals and medical devices, which includes auto-fillers and auto- injectors. Management continues to see opportunities with both new and existing customers, including good prospects to deliver life sciences solutions that leverage integrated capabilities from ATS' various life sciences businesses. In transportation, the funnel largely includes strategic opportunities related to electric vehicles, as the global automotive industry continues to pivot towards EV production. The strategic nature of EV programs and typically larger average order values can cause variability in Order Bookings. Management believes the Company's automated EV battery pack and assembly capabilities position ATS well within the industry. Funnel activity in food & beverage remains strong, with particular interest in energy efficient solutions. Timing of the summer harvest season drives some seasonality in this vertical. Funnel activity in consumer products is stable. Inflationary pressures continue to have an effect on discretionary spending, which may impact timing of some customer investments. Funnel activity in energy remains strong and includes some longer-term opportunities in the nuclear industry. The Company is focused on clean energy applications including solutions for the refurbishment of nuclear power plants, early participation in the small modular reactor market, and grid battery storage. Across all markets, customers are exercising normal caution in their approach to investment and spending. Funnel growth in markets where environmental, social and governance ("ESG") requirements are an increasing focus for customers — including grid battery storage, EV and nuclear, as well as consumer goods packaging — provide ATS with opportunities to use its capabilities to respond to customer sustainability standards and goals. Customers seeking to de-risk or enhance the resiliency of their supply chains, address a shortage of skilled workers or combat higher labour costs also provide future opportunities for ATS to pursue. Management believes that the underlying trends driving customer demand for ATS solutions including rising labour costs, labour shortages, production onshoring or reshoring and the need for scalable, high-quality, energy-efficient production remain favourable.

Order Backlog of $2,023 million is expected to help mitigate some of the impact of quarterly variability in Order Bookings on revenues in the short term. The Company's Order Backlog includes several large enterprise programs that have longer periods of performance and therefore longer revenue recognition cycles. These programs have extended the average period over which the Company expects to convert its Order Backlog to revenues, providing the Company with longer visibility. In the second quarter of fiscal 2024, management expects the conversion of Order Backlog to revenues to be in the 34% to 37% range. This estimate is calculated each quarter based on management's assessment of project schedules across all customer contracts, expectations for faster-turn product and services revenues, expected delivery timing of third-party equipment and operational capacity.

The timing of customer decisions on larger opportunities is expected to cause variability in Order Bookings from quarter to quarter. Revenues in a given period are dependent on a combination of the volume of outstanding projects the Company is contracted to, the size and duration of those projects, and the timing of project activities including design, assembly, testing, and installation. Given the specialized nature of the Company's offerings, the size and scope of projects vary based on customer needs. The Company seeks to achieve revenue growth organically and by identifying strategic acquisition opportunities that provide access to attractive end-markets and new products and technologies and deliver hurdle-rate returns. The Company is working to grow its product portfolio and after-sales service revenues as a percentage of overall revenues over time, which is expected to provide some balance to customers' capital expenditure cycles.

Management is pursuing several initiatives to grow its revenues and improve its profitability with the goal of expanding its adjusted earnings from operations margin to 15% over the long term. These initiatives include growing the Company's after-sales service business, improving global supply chain management, increasing the use of standardized platforms and technologies, growing revenues while leveraging the Company's cost structure, and pursuing continuous improvement in all business activities through the ABM, including in acquired businesses. The Company continues to make  progress in line with its plans to integrate acquired companies, and expects to realize cost and revenue synergies consistent with announced integration plans.

In the short term, ATS will continue to address disruptions to global supply chains and cost pressures due to inflation, which have been contributing to longer lead times and cost increases on certain raw materials and components. To date, the Company has mitigated many of these supply chain  disruptions through the use of alternative supply sources and savings on materials not affected by cost increases. However, prolonged cost increases and price volatility have and may continue to disrupt the timing and progress of the Company's margin expansion efforts and affect revenue recognition. Achieving and sustaining management's margin target assumes that the Company will successfully implement the initiatives noted above, and that such initiatives will result in improvements to its adjusted earnings from operations margin that offset the pressures resulting from disruptions in the global supply chain (see "Forward-Looking Statements" for a description of the risks underlying the achievement of the margin target in future periods).

The Company regularly monitors customers for changes in credit risk and does not believe that any single industry or geographic region represents significant credit risk.

In the short term, the Company expects non-cash working capital to remain above 10% as programs progress through milestones. Over the long term, the Company generally expects to continue  investing in non-cash working capital to support growth, with fluctuations expected on a quarter-over-quarter basis. The Company's long-term goal is to maintain its investment in non-cash working capital as a percentage of annualized revenues below 15%. However, given the size and timing of milestone payments for certain large EV programs, the Company could see its working capital exceed 15% of annualized revenues in certain periods as it did in the first quarter of fiscal 2024. The Company expects that continued cash flows from operations, together with cash and cash equivalents on hand and credit available under operating and long-term credit facilities will be sufficient to fund its requirements for investments in non-cash working capital and capital assets, and to fund strategic investment plans including some potential acquisitions. Acquisitions could result in additional debt or equity financing requirements for the Company. Non-cash working capital as a percentage of revenues is a Non-IFRS ratio - see "Non-IFRS and Other Financial Measures."

New York Stock Exchange Listing
On May 25, 2023, the Company commenced trading of its common shares on the New York Stock Exchange, under ticker symbol "ATS". As a result, ATS is now a dual-listed company, trading on both the TSX and NYSE. The NYSE listing supports the Company's growth strategy, enhances liquidity for the Company's common shares and improves trading access for investors in the United States and globally. In conjunction with the U.S. IPO, the Company sold 6,900,000 common shares at a price of

U.S. $41 per share, for gross proceeds of U.S. $282.9 million. Proceeds were initially used to pay down amounts drawn on the Company's revolving senior secured credit facility. The Company expects the increase in available capital from the U.S. IPO will be used for strategic opportunities, including acquisitions, as well as working capital requirements and general corporate purposes. Consistent with the Company's value creation strategy, the Company may execute on strategic opportunities, including disciplined acquisitions, if and when such opportunities arise, that drive the creation of long-term sustainable shareholder value.

Quarterly Conference Call
ATS will host a conference call and webcast at 8:30 a.m. eastern on Wednesday, August 9, 2023 to discuss its quarterly results. The listen-only webcast can be accessed live at www.atsautomation.com. The conference call can be accessed live by dialing (416) 764-8688 or (888) 390-0546 five minutes prior. A replay of the conference will be available on the ATS website following the call. Alternatively, a telephone recording of the call will be available for one week (until midnight August 16, 2023) by dialing (416) 764-8677 and entering passcode 885809 followed by the number sign.

About ATS
ATS Corporation is an industry-leading automation solutions provider to many of the world's most successful companies. ATS uses its extensive knowledge base and global capabilities in custom automation, repeat automation, automation products and value-added services including pre-automation and after-sales services, to address the sophisticated manufacturing automation systems and service needs of multinational customers in markets such as life sciences, food & beverage, transportation, consumer products, and energy. Founded in 1978, ATS employs over 6,500 people at more than 60 manufacturing facilities and over 80 offices in North America, Europe, Southeast Asia and Oceania. The Company's common shares are traded on the Toronto Stock Exchange and the New York Stock Exchange under the symbol ATS. Visit the Company's website at www.atsautomation.com.

Consolidated Revenues (In millions of dollars)
Revenues by type	Three Months Ended July 2, 2023	Three Months Ended July 3, 2022
Revenues from construction contracts	$               508.8	$               375.1
Services rendered	142.3	114.1
Sale of goods	102.5	121.4
Total revenues	$               753.6	$               610.6
Revenues by market	Three Months Ended July 2, 2023	Three Months Ended July 3, 20221
Life Sciences1	$               285.0	$               297.0
Transportation	218.5	97.0
Food & Beverage	130.6	108.8
Consumer Products1	83.6	75.7
Energy	35.9	32.1
Total revenues	$               753.6	$               610.6

1     $18.5 million of revenues earned by SP in the three months ended July 3, 2022 have been reclassified from Consumer Products to Life Sciences and are reflected in the revenues above.

 

Consolidated Operating Results (In millions of dollars)
	Three Months Ended July 2, 2023	Three Months Ended  July 3, 2022
Earnings from operations	$                 79.0	$                 61.6
Amortization of acquisition-related intangible assets	18.6	20.3
Acquisition-related transaction costs	0.1	0.4
Acquisition-related inventory fair value charges	—	5.2
Mark to market portion of stock-based compensation	4.4	(8.3)
Adjusted earnings from operations1, 2	$               102.1	$                 79.2

1     Non-IFRS Financial Measure, See "Non-IFRS and Other Financial Measures"

2    The composition of these Non-IFRS Measures has been revised from what was previously disclosed. See "Non-IFRS and Other Financial Measures."

 

	Three Months Ended	Three Months Ended
	July 2, 2023	July 3, 2022
Earnings from operations	$                 79.0	$                 61.6
Depreciation and amortization	35.7	33.6
EBITDA1	$               114.7	$                 95.2
Acquisition-related transaction costs	0.1	0.4
Acquisition-related inventory fair value charges	—	5.2
Mark to market portion of stock-based compensation2	4.4	(8.3)
Adjusted EBITDA1, 2	$               119.2	$                 92.5

1     Non-IFRS Financial Measure, See "Non-IFRS and Other Financial Measures"

2     The composition of these Non-IFRS Measures has been revised from what was previously disclosed. See "Non-IFRS and Other Financial Measures."

 

Order Backlog by Market (In millions of dollars)
As at	July 2, 2023	July 3, 20221
Life Sciences	$                  783	$                  749
Transportation2	834	372
Food & Beverage	188	164
Consumer Products	134	187
Energy	84	83
Total	$               2,023	$                1,555

1     $16.0 million of Order Backlog related to SP as at July 3, 2022 was reclassified from Consumer Products to Life Sciences.

2     The increase in transportation Order Backlog was primarily driven by EV Order Bookings.

Reconciliation of Non-IFRS Measures to IFRS Measures
(In millions of dollars, except per share data)

The following table reconciles adjusted EBITDA and EBITDA to the most directly comparable IFRS measure (net income):

	Three Months Ended	Three Months Ended
	July 2, 2023	July 3, 2022
Adjusted EBITDA1	$               119.2	$                 92.5
Less: acquisition-related transaction costs	0.1	0.4
Less: acquisition-related inventory fair value charges	—	5.2
Less: mark to market portion of stock-based compensation	4.4	(8.3)
EBITDA	$               114.7	$                 95.2
Less: depreciation and amortization expense	35.7	33.6
Earnings from operations	$                 79.0	$                 61.6
Less: net finance costs	16.9	10.7
Less: provision for income taxes	14.4	11.5
Net income	$                 47.7	$                 39.4

1    The composition of these Non-IFRS Measures has been revised from what was previously disclosed. See "Non-IFRS and Other Financial Measures."

The following table reconciles adjusted earnings from operations, adjusted net income and adjusted basic earnings per share to the most directly comparable IFRS measure (net income and basic earnings per share):

Three Months Ended July 2, 2023						Three Months Ended July 3, 2022
Earnings from operations		Finance costs	Provision for income taxes	Net income	Basic EPS	Earnings from operations	Finance costs	Provision for income taxes	Net income	Basic EPS
Reported (IFRS)	$             79.0	$           (16.9)	$           (14.4)	$        47.7	$   0.50	$             61.6	$           (10.7)	$           (11.5)	$        39.4	$   0.43
Amortization of acquisition- related intangibles	18.6	—	—	18.6	0.20	20.3	—	—	20.3	0.22
Acquisition-related inventory fair value charges	—	—	—	—	—	5.2	—	—	5.2	0.06
Acquisition-related transaction costs	0.1	—	—	0.1	—	0.4	—	—	0.4	—
Mark to market portion of stock-based compensation	4.4	—	—	4.4	0.05	(8.3)	—	—	(8.3)	(0.09)
Tax effect adjustments1	—	—	(5.8)	(5.8)	(0.06)	—	—	(4.2)	(4.2)	(0.05)
Adjusted (non-IFRS)2	$          102.1			$        65.0	$   0.69	$             79.2			$        52.8	$   0.57

1    Adjustments to provision for income taxes relate to the income tax effects of adjustment items that are excluded for the purposes of calculating non-IFRS based adjusted net income.

2     The composition of these Non-IFRS Measures has been revised from what was previously disclosed. See "Non-IFRS and Other Financial Measures."

The following table reconciles organic revenue to the most directly comparable IFRS measure (revenue):

	Three Months Ended	Three Months Ended
	July 2, 2023	July 3, 2022
Organic revenue	$               704.7	$               538.6
Revenues of acquired companies	15.3	87.2
Impact of foreign exchange rate changes	33.6	(15.2)
Total revenue	$               753.6	$               610.6
Organic revenue growth	15.4 %

The following table reconciles non-cash working capital as a percentage of revenues to the most directly comparable IFRS measures:

As at	July 2 2023	March 31 2023
Accounts receivable	$               404.3	$               399.7
Income tax receivable	15.8	15.2
Contract assets	607.3	527.0
Inventories	269.6	256.9
Deposits, prepaids and other assets	86.8	93.4
Accounts payable and accrued liabilities	(598.7)	(647.6)
Income tax payable	(45.6)	(38.9)
Contract liabilities	(250.7)	(296.6)
Provisions	(25.5)	(30.6)
Non-cash working capital	$               463.3	$               278.5
Trailing six-month revenues annualized	$            2,968.8	$            2,755.6
Working capital %	15.6 %	10.1 %

The following table reconciles net debt to adjusted EBITDA to the most directly comparable IFRS measures:

As at	July 2 2023	March 31 2023
Cash and cash equivalents	$               123.5	$             159.9
Bank indebtedness	(3.4)	(5.8)
Current portion of lease liabilities	(23.9)	(24.0)
Current portion of long-term debt	(0.1)	(0.1)
Long-term lease liabilities	(71.9)	(73.3)
Long-term debt	(880.7)	(1,155.7)
Net Debt	$              (856.5)	$           (1,099.0)
Adjusted EBITDA (TTM)1	$               427.9	$               401.2
Net Debt to Adjusted EBITDA1	2.0x	2.7x

1    The composition of these Non-IFRS Measures has been revised from what was previously disclosed. See "Non-IFRS and Other Financial Measures."

The following table reconciles free cash flow to the most directly comparable IFRS measures:

(in millions of dollars)	Three Months Ended July 2, 2023	Three Months Ended July 3, 2022
Cash flows used in operating activities	$              (107.8)	$                (31.7)
Acquisition of property, plant and equipment	(18.6)	(7.5)
Acquisition of intangible assets	(4.4)	(4.9)
Free cash flow	$              (130.8)	$                (44.1)

Certain Non-IFRS Financial Measures have been revised from previously disclosed values to exclude  the impact on stock-based compensation expense of the revaluation of deferred stock units and restricted share units resulting specifically from the change in market price of the Company's shares between periods. Management believes the adjustment provides further insight into the Company's performance.

The following table reconciles total stock-based compensation expense to its components:

(in millions of dollars)	Q1 2024		Q4 2023		Q3 2023		Q2 2023		Q1 2023		Q4 2022		Q3 2022		Q2 2022
Total stock-based compensation expense	$	10.0	$	19.3	$	9.9	$	5.3	$	(4.0)	$	0.8	$	12.7	$	10.5
Less: Mark to market portion of stock-based compensation		4.4		15.1		5.6		1.0		(8.3)		(4.2)		7.3		6.1
Base stock-based compensation expense	$	5.6	$	4.2	$	4.3	$	4.3	$	4.3	$	5.0	$	5.4	$	4.4

The following table reconciles the previously reported non-IFRS financial measures to reflect the exclusion of the stock-based compensation revaluation expenses:

(in millions of dollars)	Q3 2023	Q2 2023	Q1 2023	Q4 2022	Q3 2022	Q2 2022
Previously reported: adjusted earnings from operations	$      80.6	$      75.1	$      87.5	$      85.8	$      70.4	$      70.7
Mark to market portion of stock-based compensation	5.6	1.0	(8.3)	(4.2)	7.3	6.1
Revised: adjusted earnings from operations	$      86.2	$      76.1	$      79.2	$      81.6	$      77.7	$      76.8
Previously reported: adjusted EBITDA	$      95.1	$      88.8	$    100.8	$      99.1	$      83.5	$      83.3
Mark to market portion of stock-based compensation	5.6	1.0	(8.3)	(4.2)	7.3	6.1
Revised: adjusted EBITDA	$    100.7	$      89.8	$      92.5	$      94.9	$      90.8	$      89.4
Previously reported: adjusted basic earnings per share	$      0.52	$      0.50	$      0.64	$      0.64	$      0.52	$      0.53
Mark to market portion of stock-based compensation	0.06	0.01	(0.09)	(0.05)	0.08	0.07
Tax impact of mark to market portion of stock-based compensation	(0.02)	—	0.02	0.01	(0.02)	(0.01)
Revised: adjusted basic earnings per share	$      0.56	$      0.51	$      0.57	$      0.60	$      0.58	$      0.59

INVESTMENTS, LIQUIDITY, CASH FLOW AND FINANCIAL RESOURCES

(In millions of dollars, except ratios) As at	July 2, 2023	March 31, 2023
Cash and cash equivalents	$               123.5	$               159.9
Debt-to-equity ratio1	0.66:1	1.18:1

1     Debt is calculated as bank indebtedness, long-term debt and lease liabilities. Equity is calculated as total equity less accumulated other comprehensive income.

 

	Three Months Ended	Three Months Ended
	July 2, 2023	July 3, 2022
Cash, beginning of period	$               159.9	$               135.3
Total cash provided by (used in):
Operating activities	(107.8)	(31.7)
Investing activities	(20.3)	9.8
Financing activities	92.4	27.9
Net foreign exchange difference	(0.7)	(1.4)
Cash, end of period	$               123.5	$               139.9

 

ATS CORPORATION
Interim Condensed Consolidated Statements of Financial Position
(in thousands of Canadian dollars - unaudited)

As at	July 2 2023	March 31 2023
ASSETS
Current assets
Cash and cash equivalents	$      123,520	$       159,867
Accounts receivable	404,273	399,741
Income tax receivable	15,807	15,160
Contract assets	607,276	526,990
Inventories	269,633	256,866
Deposits, prepaids and other assets	86,755	93,350
	1,507,264	1,451,974
Non-current assets
Property, plant and equipment	264,644	263,119
Right-of-use assets	93,579	94,212
Other assets	16,160	16,679
Goodwill	1,103,176	1,118,262
Intangible assets	570,114	593,210
Deferred income tax assets	5,576	6,337
	2,053,249	2,091,819
Total assets	$    3,560,513	$    3,543,793
LIABILITIES AND EQUITY
Current liabilities
Bank indebtedness	$           3,368	$           5,824
Accounts payable and accrued liabilities	598,672	647,629
Income tax payable	45,555	38,904
Contract liabilities	250,719	296,555
Provisions	25,459	30,600
Current portion of lease liabilities	23,900	23,994
Current portion of long-term debt	79	65
	947,752	1,043,571
Non-current liabilities
Employee benefits	24,926	25,486
Long-term lease liabilities	71,937	73,255
Long-term debt	880,652	1,155,721
Deferred income tax liabilities	95,200	104,459
Other long-term liabilities	10,592	10,718
	1,083,307	1,369,639
Total liabilities	$   2,031,059	$    2,413,210
EQUITY
Share capital	$      884,610	$       520,633
Contributed surplus	17,195	15,468
Accumulated other comprehensive income	45,753	60,040
Retained earnings	578,270	530,707
Equity attributable to shareholders	1,525,828	1,126,848
Non-controlling interests	3,626	3,735
Total equity	1,529,454	1,130,583
Total liabilities and equity	$   3,560,513	$    3,543,793

Please refer to complete Interim Condensed Consolidated Financial Statements for supplemental notes which can be found on the Company's profile on SEDAR+ at www.sedarplus.com, the Company's profile on the U.S. Securities and Exchange Commission's website at www.sec.gov, and on the Company's website at www.atsautomation.com.

 

ATS CORPORATION
Interim Condensed Consolidated Statements of Income
(in thousands of Canadian dollars, except per share amounts - unaudited)

Years ended March 31	2024	2023
Revenues
Revenues from construction contracts	$         508,868	$         375,076
Services rendered	142,303	114,097
Sale of goods	102,478	121,418
Total revenues	753,649	610,591
Operating costs and expenses
Cost of revenues	540,925	440,853
Selling, general and administrative	123,684	112,172
Stock-based compensation	9,990	(3,987)
Earnings from operations	79,050	61,553
Net finance costs	16,946	10,725
Income before income taxes	62,104	50,828
Income tax expense	14,380	11,435
Net income	$           47,724	$           39,393
Attributable to
Shareholders	$           47,563	$           39,204
Non-controlling interests	161	189
$           47,724		$           39,393
Earnings per share attributable to shareholders
Basic	$               0.50	$               0.43
Diluted	$               0.50	$               0.42

Please refer to complete Interim Condensed Consolidated Financial Statements for supplemental notes which can be found on the Company's profile on SEDAR+ at www.sedarplus.com, the Company's profile on the U.S. Securities and Exchange Commission's website at www.sec.gov, and on the Company's website at www.atsautomation.com.

 

ATS CORPORATION
Interim Condensed Consolidated Statements of Cash Flows
(in thousands of Canadian dollars - unaudited)

Years ended March 31	2024	2023
Operating activities
Net income	$           47,724	$           39,393
Items not involving cash
Depreciation of property, plant and equipment	6,792	6,067
Amortization of right-of-use assets	7,117	5,732
Amortization of intangible assets	21,729	21,831
Deferred income taxes	(10,010)	(7,000)
Other items not involving cash	1,309	5,954
Stock-based compensation	1,997	695
Change in non-cash operating working capital	(184,454)	(104,408)
Cash flows used in operating activities	$        (107,796)	$          (31,736)
Investing activities
Acquisition of property, plant and equipment	$          (18,566)	$            (7,495)
Acquisition of intangible assets	(4,409)	(4,854)
Business acquisitions, net of cash acquired	(5,148)	—
Settlement of cross-currency interest rate swap instrument	—	21,493
Proceeds from disposal of property, plant and equipment	7,858	677
Cash flows provided by (used in) investing activities	$          (20,265)	$             9,821
Financing activities
Bank indebtedness	$            (2,484)	$                949
Repayment of long-term debt	(445,922)	(4,301)
Proceeds from long-term debt	184,095	57,406
Proceeds from exercise of stock options	950	978
Proceeds from U.S. initial public offering, net of issuance fees	362,757	—
Purchase of non-controlling interest	—	(452)
Repurchase of common shares	—	(20,721)
Principal lease payments	(7,021)	(5,899)
Cash flows provided by financing activities	$           92,375	$           27,960
Effect of exchange rate changes on cash and cash equivalents	(661)	(1,425)
Increase (decrease) in cash and cash equivalents	(36,347)	4,620
Cash and cash equivalents, beginning of period	159,867	135,282
Cash and cash equivalents, end of period	$         123,520	$         139,902
Supplemental information
Cash income taxes paid	$           11,791	$             3,346
Cash interest paid	$           22,318	$           13,735

Please refer to complete Interim Condensed Consolidated Financial Statements for supplemental notes which can be found on the Company's profile on SEDAR+ at www.sedarplus.com, the Company's profile on the U.S. Securities and Exchange Commission's website at www.sec.gov, and on the Company's website at www.atsautomation.com.

Notice to Reader: Non-IFRS and Other Financial Measures
Throughout this document, management uses certain non-IFRS financial measures, non-IFRS ratios and supplementary financial measures to evaluate the performance of the Company.

The terms "EBITDA", "organic revenue", "adjusted net income", "adjusted earnings from operations", "adjusted EBITDA", "adjusted basic earnings per share", and "free cash flow", are non-IFRS financial measures, "EBITDA margin", "adjusted earnings from operations margin", "adjusted EBITDA margin", "organic revenue growth", "non-cash working capital as a percentage of revenues", and "net debt to adjusted EBITDA" are non-IFRS ratios, and "operating margin", "Order Bookings", "organic Order Bookings", "organic Order Bookings growth", "Order Backlog", and "book-to-bill ratio" are supplementary financial measures, all of which do not have any standardized meaning prescribed within IFRS and therefore may not be comparable to similar measures presented by other companies. Such measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. In addition, management uses "earnings from operations", which is an additional IFRS measure, to evaluate the performance of the Company. Earnings from operations is presented on the Company's consolidated statements of income as net income excluding income tax expense and net finance costs. Operating margin is an expression of the Company's earnings from operations as a percentage of revenues. EBITDA is defined as earnings from operations excluding depreciation and amortization. EBITDA margin is an expression of the Company's EBITDA as a percentage of revenues. Organic revenue is defined as revenues in the stated period excluding revenues from acquired companies for which the acquired company was not a part of the consolidated group in the comparable period. Organic revenue growth compares the stated period organic revenue with the reported revenue of the comparable prior period. Adjusted earnings from operations is defined as earnings from operations before items excluded from management's internal analysis of operating results, such as amortization expense of acquisition-related intangible assets, acquisition-related transaction and integration costs, restructuring charges, the mark-to-market adjustment on stock-based compensation and certain other adjustments which would be non-recurring in nature ("adjustment items"). Adjusted earnings from operations margin is an expression of the Company's adjusted earnings from operations as a percentage of revenues. Adjusted EBITDA is defined as adjusted earnings from operations excluding depreciation and amortization. Adjusted EBITDA margin is an expression of the entity's adjusted EBITDA as a percentage of revenues. Adjusted basic earnings per share is defined as adjusted net income on a basic per share basis, where adjusted net income is defined as adjusted earnings from operations less net finance costs and income tax expense, plus tax effects of adjustment items and adjusted for other significant items of a non-recurring nature. Non-cash working capital as a percentage of revenues is defined as the sum of accounts receivable, contract assets, inventories, deposits, prepaids and other assets, less accounts payable, accrued liabilities, provisions and contract liabilities divided by the trailing two fiscal quarter revenues annualized. Free cash flow is defined as cash provided by operating activities less property, plant and equipment and intangible asset expenditures. Net debt to adjusted EBITDA is the ratio of the net debt of the Company (cash and cash equivalents  less bank indebtedness, long-term debt, and lease liabilities) to adjusted EBITDA. Order Bookings represent new orders for the supply of automation systems, services and products that management believes are firm. Organic Order Bookings are defined as Order Bookings in the stated period excluding Order Bookings from acquired companies for which the acquired company was not a part of the consolidated group in the comparable period. Organic Order Bookings growth compares the stated period organic Order Bookings with the reported Order Bookings of the comparable prior period. Order Backlog is the estimated unearned portion of revenues on customer contracts that are in process and have not been completed at the specified date. Book to bill ratio is a measure of Order Bookings compared to revenue.

Following amendments to ATS' Restricted Stock Unit ("RSU") Plan in 2022 to provide for settlement in shares purchased in the open market and the creation of the employee benefit trust to facilitate such settlement, ATS began to account for equity-settled RSUs using the equity method of accounting. However, prior RSU grants which will be cash-settled and deferred stock unit ("DSU") grants which will be cash-settled are accounted for as described in the Company's annual consolidated financial statements and have significant volatility period over period based on the fluctuating price of ATS' common shares. As a result, certain Non-IFRS Financial Measures (EBITDA, adjusted EBITDA, net debt to adjusted EBITDA, adjusted earnings from operations and adjusted basic earnings per share) were revised from previously disclosed values to exclude the impact on stock-based compensation expense of the revaluation of DSUs and RSUs resulting specifically from the change in market price of the Company's shares between periods. Management believes that this adjustment provides further insight into the Company's performance, as share price volatility drives variability in the Company's stock- based compensation expense.

Operating margin, adjusted earnings from operations, EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin are used by the Company to evaluate the performance of its operations. Management believes that earnings from operations is an important indicator in measuring the performance of the Company's operations on a pre-tax basis and without consideration as to how the Company finances its operations. Management believes that organic revenue and organic revenue growth, when considered with IFRS measures, allow the Company to better measure the Company's performance and evaluate long-term performance trends. Organic revenue growth also facilitates  easier comparisons of the Company's performance with prior and future periods and relative comparisons to its peers. Management believes that EBITDA and adjusted EBITDA are important indicators of the Company's ability to generate operating cash flows to fund continued investment in its operations. Management believes that adjusted earnings from operations, adjusted earnings from operations margin, adjusted EBITDA, adjusted net income and adjusted basic earnings per share are important measures to increase comparability of performance between periods. The adjustment items used by management to arrive at these metrics are not considered to be indicative of the business' ongoing operating performance. Management uses the measure "non-cash working capital as a percentage of revenues" to assess overall liquidity. Free cash flow is used by the Company to measure cash flow from operations after investment in property, plant and equipment and intangible assets. Management uses net debt to adjusted EBITDA as a measurement of leverage of the Company. Order Bookings provide an indication of the Company's ability to secure new orders for work during a specified period, while Order Backlog provides a measure of the value of Order Bookings that have not been completed at a specified point in time. Both Order Bookings and Order Backlog are indicators of future revenues that the Company expects to generate based on contracts that management believes to be firm. Organic Order Bookings and organic Order Bookings growth allow the Company to better measure the Company's performance and evaluation long-term performance trends. Organic Order Bookings growth also facilities easier comparisons of the Company's performance with prior and future periods and relative comparisons to its peers. Book to bill ratio is used to measure the Company's ability and timeliness to convert Order Bookings into revenues. Management believes that ATS shareholders and potential investors in ATS use these additional IFRS measures and non-IFRS financial measures in making investment decisions and measuring operational results.

A reconciliation of (i) adjusted EBITDA and EBITDA to net income, (ii) adjusted earnings from  operations to earnings from operations, (iii) adjusted net income to net income, (iv) adjusted basic earnings per share to basic earnings per share (v) free cash flow to its IFRS measure components   and

(vi) organic revenue to revenue, in each case for the three months ended July 2, 2023 and July 3, 2022 is contained in this news release (see "Reconciliation of Non-IFRS Measures to IFRS Measures"). This news release also contains a reconciliation of (i) non-cash working capital as a percentage of revenues and (ii) net debt to their IFRS measure components, in each case at both July 2, 2023 and March 31, 2023 (see "Reconciliation of Non-IFRS Measures to IFRS Measures"). A reconciliation of Order  Bookings and Order Backlog to total Company revenues for the three months ended July 2, 2023 and July 3, 2022 is also contained in this news release (see "Order Backlog Continuity").

Note to Readers: Forward-Looking Statements

This press release contains certain statements that may constitute forward-looking information and forward-looking statements within the meaning of applicable Canadian and United States securities laws ("forward-looking statements"). All such statements are made pursuant to the "safe harbour" provisions of Canadian provincial and territorial securities laws and the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical facts regarding possible events, conditions or results of operations that ATS believes, expects or anticipates will or may occur in the future, including, but not limited to: the value creation strategy; the Company's strategy to expand organically and through acquisition, and the expected benefits to be derived; the ABM; disciplined acquisitions; various market opportunities for ATS; expanding in emerging markets; the Company's Order Backlog partially mitigating the impact of variable Order Bookings; rate of Order Backlog conversion to revenue; the potential impact of timing of customer decisions on Order Bookings, performance period, and timing of revenue recognition; the announcement of new Order Bookings and the anticipated timeline for delivery; potential impacts on the time to convert opportunities into Order Bookings; expected benefits with respect to the Company's efforts to grow its product portfolio and after-sale service revenues; Company's goal of expanding its adjusted earnings from operations margin over the long term and potential impact of supply chain disruptions; expectation of synergies from integration of acquired companies; non-cash working capital levels as a percentage of revenues in the short-term and the long-term; expectations in relation to meeting liquidity and funding requirements for investments; potential to use debt or equity financing to support strategic opportunities and growth strategy; underlying trends driving customer demand; potential impacts of variability in bookings caused by the strategic nature and size of electric vehicle programs; expected capital expenditures for fiscal 2024; the Company's belief with respect to the outcome of certain lawsuits, claims and contingencies; and the uncertainty and potential impact on the Company's business and operations due to the current macro economic environment including the impacts of infectious diseases and pandemics, including the COVID-19 pandemic, inflation, supply chain disruptions, interest rate changes, and the war in Ukraine.

Forward-looking statements are inherently subject to significant known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of ATS, or developments in ATS' business or in its industry, to differ materially from the anticipated  results, performance, achievements, or developments expressed or implied by such forward-looking statements. Important risks, uncertainties, and factors that could cause actual results to differ materially from expectations expressed in the forward-looking statements include, but are not limited to: the impact of regional or global conflicts; general market performance including capital market conditions and availability and cost of credit; performance of the markets that ATS serves; industry challenges in securing the supply of labour, materials, and, in certain jurisdictions, energy sources such as natural gas; impact of inflation; interest rate changes; foreign currency and exchange risk; the  relative strength of the Canadian dollar; risks related to customer concentration; risks related to a recession, slowdown, and/or sustained downturn in the economy; impact of factors such as increased pricing pressure, increased cost of energy and supplies, and delays in relation thereto, and possible margin compression; the regulatory and tax environment; the emergence of new infectious diseases and pandemics, including the potential resurgence of COVID-19 and/or new strains of COVID-19 and collateral consequences thereof, including the disruption of economic activity, volatility in capital and credit markets, and legislative and regulatory responses; the effect of events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transaction counterparties, or other companies in the financial services industry generally, or concerns or rumours about any events of these kinds or other similar risks, that have in the past and may in the future lead to market-wide liquidity problems; energy shortages and global prices increases; inability to successfully expand organically or through acquisition, due to an inability to grow expertise, personnel, and/or facilities at required rates or to identify, negotiate and conclude one or more acquisitions, or to raise, through debt or equity, or otherwise have available, required capital; that the ABM is not effective in accomplishing its goals; ATS is unable to expand in emerging markets, or is delayed in relation thereto, due to any number of reasons, including inability to effectively execute organic or inorganic expansion plans, focus on other business priorities, or local government regulations or delays; that the timing of completion of new Order Bookings is other than as expected due to various reasons, including schedule changes; the customer exercising any right to withdraw the Order Booking or to terminate the program in whole or in part prior to its completion, thereby preventing ATS from realizing on the full benefit of  the program; that some or all of the sales funnel is not converted to Order Bookings due to competitive factors or failure to meet customer needs; that the market opportunities ATS anticipates do not materialize or that ATS is unable to exploit such opportunities; variations in the amount of Order Backlog completed in any given quarter; timing of customer decisions related to large enterprise programs and potential for negative impact associated with any cancellations or non-performance in relation thereto; that the Company is not successful in growing its product portfolio and/or service offering or that expected benefits are not realized; that efforts to expand adjusted earnings from operations margin over long-term are unsuccessful, due to any number of reasons, including less than anticipated increase in after-sales service revenues or reduced margins attached to those revenues, inability to achieve lower costs through supply chain management, failure to develop, adopt internally, or have customers adopt, standardized platforms and technologies, inability to maintain current cost structure if revenues were to grow, and failure of ABM to impact margins; that acquisitions made are not integrated as quickly or effectively as planned or expected and, as a result, anticipated benefits and synergies are not realized; non-cash working capital as a percentage of revenues operating at a level other than as expected due to reasons, including, the timing and nature of Order Bookings, the timing of payment milestones and payment terms in customer contracts, and delays in customer programs; underlying trends driving customer demand will not materialize or have the impact expected; that capital expenditure targets are increased in the future or the Company experiences cost increases in relation thereto; risk that the ultimate outcome of lawsuits, claims, and contingencies give rise to material liabilities for which no provisions have been recorded; and other risks and uncertainties detailed from time to time in ATS' filings with securities regulators, including, without limitation, the risk factors described in ATS' annual information form for the fiscal year ended March 31, 2023, which are available on the System for Electronic Document Analysis and Retrieval ("SEDAR+") at www.sedarplus.com and on the U.S. Securities Exchange Commission's Electronic Data Gathering, Analysis and Retrieval System ("EDGAR") at www.sec.gov. ATS has attempted to identify important factors that could cause actual results to materially differ from current expectations, however, there may be other factors that cause actual results to differ materially from such expectations.

Forward-looking statements are necessarily based on a number of estimates, factors, and assumptions regarding, among others, management's current plans, estimates, projections, beliefs and opinions, the future performance and results of the Company's business and operations; the ability of ATS to execute on its business objectives; and general economic and political conditions, and global events, including the COVID-19 pandemic.

Forward-looking statements included in this press release are only provided to understand management's current expectations relating to future periods and, as such, are not appropriate for any other purpose. Although ATS believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and ATS cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. ATS does not undertake any obligation to update forward-looking statements contained herein other than as required by law.

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SOURCE ATS Corporation